TMI Blog1989 (9) TMI 1X X X X Extracts X X X X X X X X Extracts X X X X ..... maturity of insurance policy, in case of delay in payment. Accordingly, this is the only question arising for decision in this appeal. The writ petition in the High Court was filed by Smt. Kamalabai G. Ranade, the wife of Gangadhar Vishwanath Ranade of Nagpur. The said G. V. Ranade took four policies on his own life from the Life Insurance Corporation of India during the period 1958 to 1960. These policies were paid-up and the particulars thereof including their paid-up value payable on the date of maturity are as under : Policy Number Sum assured Paid-up value Date of maturity 19620636 10,000 3,415.70 14-09-1972 13932229 3,500 1,118.65 28-12-1973 13969144 5,000 892.20 9-11-1975 13972300 2,000 557.70 21-12-1975 In April, 1969, G. V. Ranade assigned absolutely all these four insurance policies in favour of his wife, Smt. Ka ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Life Insurance Corporation for or on account of G. V. Ranade. The Life Insurance Corporation was also required by this notice to take the necessary steps for revocation of the Income-tax Officer's notice and to make the payment due in respect of all these policies to the assignee. The assignee sent a similar notice to the Income-tax Officer asserting her claim as the assignee to get the moneys payable under the policies. The Income-tax Officer, in a letter dated July 28, 1972, addressed to the Life Insurance Corporation, had added that the alleged transfer of policies by G. V. Ranade to his wife are void with an intention to defraud the Revenue and the case falls within the mischief of section 281 of the Income-tax Act, 1961, and the Life Insurance Corporation was requested to withhold any payment to Smt. Kamalabai G. Ranade till further communication from the Income-tax Officer. On September 5, 1972, Smt. Kamalabai G. Ranade filed a writ petition (S. C. A. No. 861 of 1972) in the High Court of Bombay impleading the Life Insurance Corporation and the Income-tax Officer as respondents therein claiming several reliefs which are mentioned at pages 33 to 35 of the paper-b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g for a direction to the Income-tax Officer to revoke all notices issued under section 226(3) to the Life Insurance Corporation and to the Life Insurance Corporation to pay to her the amount due against the policies which had matured. On April 4, 1977, counsel for the Income-tax Officer produced before the High Court a copy of the order dated April 1, 1977, passed by the Income-tax Officer withdrawing the notice tinder section 226(3) of the Income-tax Act, 1961, and the writ petition was dismissed as withdrawn. Smt. Kamalabai G. Ranade then promptly sent a notice to the Life Insurance Corporation demanding payment of the total amount due against these four policies together with interest at 15% since the delay in payment had been occasioned by the default of the Life Insurance Corporation. Admittedly, the Life Insurance Corporation has made the payment of these amounts to Smt. Kamalabai G. Ranade in these circumstances. The Life Insurance Corporation has not disputed at any stage its, liability to pay to Smt. Kamalabai G. Ranade the amounts due under these policies. However, it has disputed its liability to pay interest thereon for any period after the date of maturity on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 31, 1975 (statement on oath by the Life Insurance Corporation being made only on December 5, 1975), is contrary to law. To support the main contention of the appellant, that it is not liable for payment of any interest for any period after maturity of the policies, Shri P. P. Rao, learned counsel for the appellant, advanced several arguments. His first argument is that the Income-tax Officer was a necessary party in the writ petition giving rise to this appeal and in his absence no effective adjudication of this dispute can be made. The second argument is that the High Court has misconstrued section 226(3) of the Income-tax Act, 1961, and thereby, wrongly fastened the liability for payment of interest up to December 31, 1975, on the appellant. The third argument is that the principle of res judicata or at least constructive res judicata, as a result of the earlier writ petitions, bars the claim for payment of interest in this writ petition. The fourth argument is that the writ petition (S. C. A. No. 302 of 1977) being withdrawn unconditionally without liberty to file a fresh petition, this writ petition (W. P. No. 1248 of 1977) is not maintainable. The fifth argument is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt of learned counsel for the respondent, Shri Sanghi, it is sufficient to observe that it would be open to the Life Insurance Corporation to obtain refund of the amount of ₹ 3,415.70 deposited by it with the Income-tax Officer together with interest, if any, payable on that refund by the Income-tax Department, since it has been conceded that the respondent does not claim that amount from the Income-tax Officer. We shall now deal with the remaining arguments of Shri Rao, learned counsel for the appellant. The first argument of learned counsel for the appellant is that the Income-tax Officer was a necessary party in the writ petition giving rise to this appeal. We are unable to accept this contention. The only claim made in Writ Petition No. 1248 of 1977 decided on January 7, 1981., giving rise to this appeal is for payment of interest by the appellant, and no relief has been sought against the Income-tax Officer. This being so, for effective adjudication of the Life Insurance Corporation's liability towards the respondent, the presence of the Income-tax Officer is not necessary. The respondents claim is only against the Life, Insurance Corporation without any claim bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ance Corporation to make the necessary statement on oath in accordance with section 226(3)(vi) of the Income-tax Act, 1961, within two months. It is obvious that with this direction requiring the Life Insurance Corporation to make the requisite statement on oath under section 226(3)(vi) of the Income-tax Act, 1961, no further question survived in that writ petition and the consequent civil appeal in this court since the further questions including payment of interest on the principal amount were to arise only at a subsequent stage. Asking for any other relief was obviously premature at that stage. It is apparently for this reason that this court did not at that stage go into the other questions relating to the further reliefs specified in that writ petition. That decision cannot, therefore, preclude agitation of the question of interest subsequently. The next writ petition filed by Smt. Kamalabai G. Ranade was S. C. A. No. 302 of 1977, in the Bombay High Court. The prayer made therein was for a direction to the Life Insurance Corporation to pay the principal amount together with interest thereon. In this writ petition also, the Income-tax Officer was impleaded as a party. This w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same is rejected. The fifth argument relates to the rate of interest. Shri Rao contended that the award of interest at 15% per annum is excessive even if the Life Insurance Corporation is held liable for payment of interest. Reference was made by Shri Rao to section 244 of the Income-tax Act, 1961, providing for payment of interest on refund which prescribed the rate of 12% per annum from July 1, 1972, to October 1, 1984, the increase to 15% per annum being made therein only from October 1, 1984, by amendment of that section. It was urged that the period in question in the present case being prior to October 1, 1984, the rate of 15% per annum in excess of the statutory provision of 12% per annum in section 244 of the Income-tax Act, 1961, is unjustified. Admittedly, the award of interest, in the present case, for payment by the Life Insurance Corporation is not governed by section 244 of the Income-tax Act, 1961. Apparently for this reason, learned counsel for the appellant relied on section 244 of the Income-tax Act, 1961, as of persuasive value. We are not impressed by this argument. The High Court has relied on the fact that interest at 15% per annum is reasonable, in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be produced for the purpose of any entry, endorsement or the like being made before payment is made, notwithstanding any rule, practice or requirement to the contrary. (v) Any claim respecting any property in relation to which a notice under this sub-section has been issued arising after the date of the notice shall be void as against any demand contained in the notice. (vi) Where a person to whom a notice under this sub-section is sent objects to it by a statement on oath that the sum demanded or any part thereof is not due to the assessee or that he does not hold any money for or on account of the assessee, then, nothing contained in this sub-section shall be deemed to require such person to pay any such sum or part thereof, as the case may be, but if it is discovered that such statement was false in any material particular, such person shall be personally liable to the Income-tax Officer to the extent of his own liability to the assessee on the date of the notice or to the extent of the assessee's liability for any sum due under this Act, whichever is less. (vii) The Income-tax Officer may, at any time or from time to time, amend or revoke any notice issued unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e benefit claimed by the Life Insurance Corporation is not available to it, in the facts of the present case. Admittedly, assignment of the policies was made by the insured, G. V. Ranade, and the same was duly accepted and registered by the Life Insurance Corporation in April, 1969. It is, therefore, obvious that the Life Insurance Corporation was bound to act on that assignment in favour of Smt. Kamalabai G. Ranade unless the assignment was held to be invalid by a competent authority in a proper proceeding taken for this purpose. It is significant that the Life Insurance Corporation never disputed the validity of the assignment and was throughout prepared to act on it. It is undisputed that the assignment was not declared invalid by any competent authority. Mere issuance of notice under section 226(3) of the Income-tax Act, 1961, did not have the effect of invalidating the assignment nor did the casual mention of section 281 of the Income-tax Act, 1961, by the Incometax Officer in his letter dated August 28, 1972, result in this consequence. Any further step towards formation of the final opinion by the Income-tax Officer could be taken only after the Life Insurance Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... son shall be personally liable to the Income-tax Officer to the extent of the assessee's liability on the date of notice. Clause (vii) then provides, inter alia, for amendment or revocation of the notice issued under this sub-section by the Income-tax Officer. This stage of amendment or revocation of the notice under clause (vii) is reached only after the stage provided in clause (vi), in a case where the notice objects that he does not hold the money for or on behalf of the defaulter of tax dues. It is, therefore, obvious that the question of revocation of the notice under clause (vii) of subsection (3) of section 226 of the Income-tax Act, 1961, arose in the present case only after the Life Insurance Corporation made the requisite statement on oath under section 226(3)(vi) of the Act in view of its consistent stand throughout that the moneys due under the policies were held by it for and on behalf of the assignee and not the defaulter. Mere information of the assignment to the Income-tax Officer and keeping the assignee informed of the Income-tax Officer's. action did not amount to discharge of the statutory obligation under section 226(3)(vi) of the Act, by the Life I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remotely the possibility of any risk of personal liability. On the contrary, the real risk of the Life Insurance Corporation being treated deemed defaulter/assessee under clause (x) of sub-section (3) of section 226 of the Act lay in its failure to pay to the Income-tax Officer after receipt of notice under section 226(3), the amounts of the matured policies within the time given by the Income-tax Officer or a reasonable time, without objecting to the demand by denying its liability to be assessed in the manner prescribed in clause (vi) thereof, instead of in doing so. Prudence also required the Life Insurance Corporation, in its own interest, to object to the demand according to clause (vi) instead of refusing or delaying the objection. The argument that such a statement was not made since it involved the likelihood of exposing the Life Insurance Corporation or any of its officers to personal liability has, therefore, no merit. This being the only reason given by the Life Insurance Corporation to justify the inordinate delay in making the requisite statement under section 226(3)(vi) of the Income-tax Act, 1961, it is obvious that this defence is untenable. Sub-section (3) of ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
